Actavis Seeks Emerging-Market Partner to Copy Roche Cancer Drugs

June 14 (Bloomberg) -- Actavis Group hf is scouring
emerging markets for a partner to help it copy complicated
biotechnology medicines such as Roche Holding AG’s $7.7 billion
blockbuster Avastin.

The closely held generic-drug maker, based in Zug,
Switzerland, is seeking a partner that has already done
substantial scientific work to show its versions of biological
medicines are safe and effective, Chief Executive Officer
Claudio Albrecht said in an interview in Zurich. Actavis is
already in talks with some companies, Albrecht said.

Within the next decade, the majority of top-selling
products to lose patent protection will be biologics, which are
made from living cells, Albrecht said. Generic-drug makers that
have relied on making fast, cheap copies of simple chemical
compounds will need to invest more in research and development
to make so-called biosimilars and build a sales force to market
them to doctors, he said.

“The generic model as we knew it is dying as we speak,”
Albrecht said. “You can’t do it the old way.”

Unlike chemical generics, biosimilars are likely to require
patient trials, at least in Europe and the U.S., to prove they
do the same thing as the original, regulators on both sides of
the Atlantic have said.

Actavis may start developing biosimilars with a partner in
emerging markets where such trials aren’t required, Albrecht
said. Sales there could finance the clinical tests necessary to
bring them to patients in Europe and the U.S., he said. Partner
candidates might include companies in India or in Latin America,
Albrecht said. Actavis had 1.7 billion euros ($2.4 billion) in
annual sales last year, of which 5 percent came from emerging
markets.

Larger Rivals

The Swiss generic-drug maker needs a partner to compete
with bigger rivals such as Novartis AG and Petah Tikva, Israel-based Teva Pharmaceutical Industries Ltd., Albrecht said.
Novartis, based in Basel, Switzerland, won the first European
approval for a biosimilar, the growth hormone Omnitrope, in
2006.

Albrecht wouldn’t say exactly which drugs he wants to
target, though he said they’re likely to include monoclonal
antibodies, which mimic substances produced by the human immune
system to fight infection.

“Obviously we’re looking at the big ones,” he said,
citing Avastin, the world’s best-selling cancer drug with 6.46
billion Swiss francs ($7.7 billion) in revenue last year, from
Basel-based Roche. “There are talks ongoing, but there is
nothing concrete.”

Rituxan Copies

Meanwhile, Indian generic-drug maker Dr. Reddy’s
Laboratories Ltd. began selling a new version of Roche’s Rituxan
there in 2007. The drug had 232 million rupees ($5.2 million) in
sales there in the 2009-10 fiscal year, according to the
company’s annual report.

Biocon Ltd., India’s biggest biotechnology company, in
October sold New York-based Pfizer Inc. rights to four
biosimilar insulin products for an upfront payment of $200
million. Cipla Ltd., which built a $1 billion business making
generic HIV treatments, said last year that it planned to sell
biosimilar versions of Roche and Amgen Inc. medicines with a
partner in China.

Albrecht, former CEO of Germany’s Ratiopharm GmbH, took
over at Actavis about a year ago after leading an unsuccessful
bid for private equity group EQT Partners AB to buy Ratiopharm.
EQT sought to team up with Actavis to boost its chances, people
familiar with the matter said at the time, eventually losing to
Teva. The Israeli company bought Ratiopharm last year for 3.63
billion euros.

Acquisition Strategy

Actavis could finance an acquisition bigger than 200
million euros, and possibly as big as 1 billion euros, Albrecht
said.

“It depends on the opportunity, and it depends on how the
synergies fall,” he said. “I’m reluctant to move into such an
opportunity. It would have to be a very, very good
opportunity.”

The company is in the final phase of contract negotiations
on a collaboration with Polish insulin producer Bioton SA and
expects to sign by the end of the month, Albrecht said.

Actavis, backed by Deutsche Bank AG, overhauled its
business after billionaire owner Bjorgolfur Thor Bjorgolfsson
lost money in the financial crisis, leaving the Frankfurt-based
lender with as much as 5 billion euros of debt, people familiar
with the company said in 2009. The drugmaker refinanced its debt
last year. Deutsche Bank took a 55 million-euro charge in the
first quarter related to Actavis and said it expects "reasonably
positive results" from the investment this year.

Possible IPO

Albrecht repeated that he’s weighing taking the company
public through an initial public offering or pursuing a merger
within three years. Albrecht said he would prefer for Actavis to
be about three times its current size. He moved the drugmaker
from Iceland to Zug in May.

“You need critical size, you need scale, you need
tremendous growth in order to finance the new product
ventures,” Albrecht said. “We are lacking critical size.”

Still, “not much will happen” for the next two years as
the company continues to integrate the more than 15 acquisitions
it made in 10 years through 2009, he said.

“We have to do something,” Albrecht said. “We haven’t
made up our minds about whether it should be a public offering
or a merger, but what is clear is that we still need some time
to bring the company into the shape we want it to be.”